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President's Message
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Eric Bruck, CFP®
President
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President's Message
Dear fellow FPA member:
In this summer edition of my President’s Message and our Newsletter, I’m pleased to share with you some good news, and some
“interesting” news. As the Chinese saying goes, we live in some “interesting” times.
First, here’s some good news.
FPA LA has updated and updated our mission statement:
- To be the forum for the professional growth and success of every FPALA member
- To make a positive difference in our local communities through advancing financial literacy and pro bono activity
- To build a strong FPALA community, ensuring chapter leadership continuity
Each of your Board’s 2009 campaign objectives has been held up to the litmus test of “does this align with our mission statement.”
As a result, our progress on all fronts has been more focused and impactful in the present and more meaningful for our long term commitments.
Your Board has grown with a number of “best and brightest” committed volunteers from your midst as new committee members have joined us to advance and
expand our capabilities. Our new committee members are profiled elsewhere in this issue, along with progress reports from some of our Board members.
Inflation or Deflation ahead? Bull Market or Bull Rally?
The “interesting news” comes at us from two important fronts:
- the increased regulatory fervor in Washington, where varied interests are lobbying for control over our collective professional destinies; and
- financial markets are marching ahead to the beat of a drummer only they can hear – no underlying fundamentals support the supposition of a long
term historically familiar growth trend
The term “Interesting” comes to mind, connoting the meaning of the translation of a Chinese character for “crisis,” or “dangerous opportunity.” Our
dangerous opportunities abound as advisors in the uncharted waters of this economy.
Differing Interpretations of the data abound. Inflation should be warranted by the amount of money being printed; yet so little is being lent into
circulation that spending remains depressed, unemployment continues to grow, and GDP could be negative to flat for the next two quarters. Earnings
are increasing – but is this due to increased productivity or cost cutting? How long can this “trend” sustain itself - increased productivity reflected in
increased hiring? Commodity prices are increasing – is this due to increased demand for resources or self-fulfilling demand created by trading volume? All
– important questions.
“Stocks are for the long run!” Following the causal chain for this logic leads us to question the possible sources of earnings, which reflect profits, which
in turn get reflected in GDP and justify stock prices. The historic stock returns that we refer to as we offer this battle cry were attained during a period
of 5% average annual GDP growth. With GDP growth projected at 1-3% per year for the next 5 years or so, where are those equity premiums (rewards) that
justify the risk taking inherent in stocks going to come from? Again, consumers (70% contributors to our GDP) are increasingly unemployed and not prone to
spending now even if they could – which they can’t.
According to Harvard economics professor Nial Ferguson, America’s wealth has shrunk back to 1989 levels – over $15 trillion has disappeared. And, until banks
begin lending again (would the “bank of you” confidently lend against collateral of depreciating assets when your own balance sheet is delevering and weighted
down with bad assets?), the available capital needed to act as fuel to ignite the engines of growth in this country comes up very short.
As advisors and FPA members, we each have a fiduciary obligation not only to our clients to protect and grow their wealth, but to our own businesses to succeed
and support our employees and their families. We owe a special obligation to our own families to maintain our lifestyles and secure our own futures. So, we
need to get this mostly right…at least not so wrong as we did a year ago - looking, waiting and advising on behalf of an illogical and unsustainable “V” shaped
recovery.
As FPA members, we are heralded by National as the beacons of hope for a public that is still shell-shocked from the unprecedented events of last year and the
continuing damaged condition of our economy. The Financial Planning Coalition (CFP® Board, FPA & NAPFA) is promoting us as prime examples of client-first
fiduciaries to the public.
We have that “dangerous opportunity” now to think outside the familiar boxes we were trained to think within. Are we investing for our clients with
inflationary expectations or deflationary expectations? Are we investing under the assumption that we are in a new bull market, or is this simply a bull
rally before the second dip of recession?
As we all know, there is no one-size-fits all to investing. The decisions we make and the actions we take will be pivotal to the lives and livelihoods of our
clients as well as to the success of our practices.
As a community, let’s network, share, educate and lean on each other to take advantage of our dangerous opportunity. Please give us feedback as to how FPALA
can become more essential to your professional life. We hope see you each month at the Proud Bird.
Respectfully,
Eric D. Bruck, CFP®
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